The Swensen 6 ETF Portfolio, 13 Months Later

Includes: TIP, TLT, VEU, VNQ, VTI, VWO
by: Lowell Herr

Approximately thirteen months ago, the rationale for "The Swensen 6 ETF Portfolio" was explained in this article and at that time the projected annualized return was 8.4% with a projected standard deviation of 14.2%. How have those annualized projections turned out over the past year?

Quantext Portfolio Analysis for Swensen Six: Over the past 13 months, using Yahoo Finance data, the Swensen Six posted an annualized return of 8.3% with a standard deviation of 6.9%. That close return percentage can be attributed to a lot of good luck. Holding 30% of the portfolio in TLT and TIP held down the performance as the U.S. equities market exploded to the upside. If one looks at a five-year period, the Swensen Six outperformed the S&P 500 and did it with lower volatility.

Going forward, the projected return is 8.1% or approximately 100 basis points above that projected for the S&P 500. While the following data was used to measure return since the last article, when attempting to come up with future projections, it is best to use a minimum of three years of data.

Efficient Frontier: A quick glance at the following efficient frontier graph shows observers that the Swensen Six is anything but optimized. The diamond dot shows the current Return/Risk ratio and the small red dot locates the optimized portfolio on the efficient frontier curve. The Swensen Six is a conservative portfolio.

Buy-Hold-Sell Recommendations: What course correction is needed to optimize this portfolio? The simple solution is to increase shares in VTI and reduce positions in TLT and TIP.

Within the following table are two directives. One is provided by the optimizer and these recommendations are guided by constraints placed on both asset classes and the six individual holdings. Those constraints are not visible in this article. The second directive is based on ETF momentum. Momentum is calculated using growth rates over the past 91 and 182 days plus a volatility measurement. These calculations are explained in greater detail on my blog, ITA Wealth Management.

If one is looking for a simple yet conservative asset allocation plan, the Swensen Six is a good starting point.

Disclosure: I am long VTI, VEU, VWO, VNQ, TIP, TLT. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.